Shares of L&H jumped $8, or 25 percent, to $40 today on the Brussels-based electronic exchange Easdaq following the announcement. L&H is also listed on the Nasdaq exchange, where it set a high of $52.5 in May 1996.

The two firms said that the $45
million deal was part of a broad technology sharing and cooperation arrangement.

No timetable was given for the delivery of speech-enabled Windows technology.

The statement said L&H would develop applications to currently
available and future versions of Microsoft's speech application programming interface (SAPI). L&H will also continue to develop products for horizontal and vertical markets, such as the medical and legal sectors, and will embed speech applications into special-purpose hardware, the company said.

"For the past several years Microsoft has made great progress
towards a vision of the personal computer that can interact with
users via spoken language," Nathan Myhrvold, Microsoft's chief
technology officer said in the statement.

"Through this alliance with Lernout & Hauspie we are taking
a big leap forward in transforming that vision into reality,"
he added.

As part of the deal, Bernard Vergnes, chairman of Microsoft
Europe, will take a seat on the board of Lernout & Hauspie.

Microsoft also said it was investing $53 million in the
Flanders Language Valley Fund (FLV).

FLV, set up at the end of 1995, is dedicated to supporting
companies to develop speech-based technologies and applications.

Patrick de Smedt, managing director of Microsoft Belgium, will take a seat on FLV's board of directors.

L&H was set up on the initiative of Jo Lernout and
Pol Hauspie, the founders and main shareholders in Lernout &
Hauspie.